Non-compete reform has come to Massachusetts, with wide-ranging legal and practical implications for any employers with workers in Massachusetts. Employers have just six weeks to consider and adopt a new approach to non-compete agreements for their workforces. The new law, which becomes effective on October 1, 2018, comes after many years of debate and dramatically shifts the restrictive covenant legal landscape in the Commonwealth.

While employers will still be able to utilize non-compete agreements for most workers, the law necessitates a new approach to drafting, implementing, and enforcing these agreements. This post summarizes the new law, identifies employer action items, and raises several issues that will emanate from this reform.

Brief Summary of the New Law:

The key takeaways of the law are as follows:

Non-compete agreements will be more expensive to utilize. Employers must offer the employee paid “garden leave” for the length of the restricted period of at least 50% of the employee’s highest base salary during the prior two (2) years (or some “other mutually-agreed upon consideration,” which the agreement must specify);

Employers cannot require all employees to sign non-compete agreements. The law prohibits employers from requiring certain categories of workers, including non-exempt employees, to enter into non-compete agreements;

Non-compete agreements may be void depending on the reason for separation. Employers cannot enforce non-compete restrictions against employees who have been terminated without cause or laid off, except when included as part of a separation agreement;

The new law only applies to agreements entered into on or after October 1, 2018. Older agreements are not voided, but employers should consider revisiting the current agreements in place. We address this issue further below;

Continued employment is no longer sufficient consideration. Employers must provide fair and reasonable consideration to support non-compete agreements signed after employment has commenced;

The non-compete agreement must be reasonably tailored. A non-compete agreement must: (i) be limited to a maximum one (1) year non-compete period (subject to a limited exception discussed further below); (ii) protect statutorily covered employer interests (i.e. trade secrets); and (iii) cover a geographical scope that is reasonable in relation to the employer’s protectable interests;

The new law applies to employees and independent contractors alike. The new law specifically defines employee to include contractors and will also require employers to retool those agreements to the extent they include non-compete provisions; and

The law does not apply to all agreements with restrictive covenants. The law does not cover non-solicitation agreements, non-disclosure agreements, and separation agreements (among others discussed below), which means that these agreements will continue to be analyzed under the common law, but now against the backdrop of the new public policy on non-compete restrictions.

Taken together, while many of the law’s provisions reflect best practices for enforceable non-compete agreements, several of the requirements – particularly around the requisite consideration supporting non-compete agreements – will now require employers to evaluate their overall non-compete strategy, update their non-compete agreements, and adjust their human resources processes to ensure compliance with the law.

Below we explore the law in greater detail and highlight the practical and legal implications for employers.

Employers in Massachusetts are watching closely as a non-compete bill was recently passed by the Legislature and is now on Governor Baker’s desk. Currently slated to take effect on October 1, 2018, the law will significantly impact the drafting, implementation and enforcement of non-compete agreements in the Commonwealth. Governor Baker is expected to sign the bill into law, but before doing so, he may amend and send the bill back to the Legislature to be voted on again.

As excitement builds for the March Madness Final Four on Saturday and the championship game next Monday, another exciting event is also rapidly approaching – Mintz Levin’s Third Annual Employment Law Summit. And just as South Carolina, Gonzaga, Oregon and North Carolina have so far refused to go quietly from the NCAA tournament, one of the topics we’ll be covering is how to handle employees who resist efforts to manage their performance and conform their behavior to professional norms. This panel discussion will feature three superb guests moderated by Mintz Member Dick Block and promises to be a spirited and engaging event.

On April 6, 2017, Mintz Levin will be hosting its Third Annual Employment Law Summit at the Princeton Club in New York City. This half-day seminar will feature as its keynote speaker Liz Vladeck, the Deputy Commissioner for the Office of Labor Policy and Standards at the NYC Department of Consumer Affairs. Deputy Commissioner Vladeck will discuss NYC’s new Office of Labor Policy and Standards, its initiatives, and enforcement of the expanding universe of NYC employment laws (including the new Freelance Workers Act and the pending Fair Workweek legislation). The seminar will also offer various segments on the most important workplace issues of the day, including how the new Trump Administration will impact workplace law, employee cybersecurity issues, equal pay issues during the employment life cycle, dealing with the difficult employee, the latest in employee benefits, and more – it’s a program that you will not want to miss, so register now.

This event is intended for HR professionals, in-house counsel, and senior executives.

The Second Circuit recently adopted the “Cat’s Paw” theory of liability in Title VII cases. This was hardly a surprise as other Circuit Courts had done the same after the United States Supreme Court endorsed Cat’s Paw in a USERRA case. But the Second Circuit went even further, allowing for the use of the Cat’s Paw argument in Title VII retaliation cases and in cases where a non-supervisory employee’s discriminatory actions lead the employer to take an adverse employment action against that employee’s co-worker. Until now, Cat’s Paw had mostly focused on employer liability based on the actions of misbehaving supervisors in hostile work environment cases. The decision puts additional pressure on employers to identify and eliminate discriminatory behavior in their workplaces. This post will briefly examine the Cat’s Paw doctrine and explain how the Second Circuit’s expanded its use in Vasquez v. Empress Ambulance Service, Inc., No. 15-3239 (2d Cir. Aug. 29, 2016).

Mintz Levin’s Employment Labor & Benefits Practice

Employment relationships are among the most regulated in the nation, and ensuring compliance with the many laws and regulations impacting the workplace can be quite challenging. Mintz Levin can help you navigate through this complex legal environment, delivering practical advice and counsel to enable you to make smart decisions and minimize risks.Read More